ED Reverses Course on Consensus Language for Grad PLUS

The Department of Education confirmed this week that Graduate PLUS loans will count toward the new $257,500 lifetime borrowing limit established under the One Big Beautiful Bill Act (OB3) for some borrowers, reversing its earlier interpretation of the statute. This reinterpretation injects fresh uncertainty into an already turbulent financial aid landscape just weeks before the new OB3 rules take effect on July 1, 2026.

The shift follows an April 17 webinar on legacy loan limits during which the Department gave conflicting answers on whether Grad PLUS borrowing would be included in the newly established aggregate lifetime borrowing cap. In its proposed Reimagining and Improving Student Education (RISE) regulations, published in the Federal Register in January, the Department stated that the lifetime limit excluded Federal PLUS and Federal Direct PLUS loans. Multiple subsequent guidance materials from the Office of Federal Student Aid reinforced that reading. On Monday, the Department reversed that position.

Under the new interpretation, Grad PLUS loans disbursed before July 1, 2026, will count toward a borrower's $257,500 lifetime limit once the new cap is in effect. This means that the limit will apply after the borrower exits the three-year exception for currently enrolled students. The exception allows borrowers who received a Grad PLUS disbursement before July 1 and remain continuously enrolled in the same program to continue borrowing under current rules for up to three additional years or until program completion, whichever comes first.

What Changed?

The interpretive question stems from the OB3's language defining the $257,500 ceiling as the maximum amount of loans that can be made to any borrower (bolded below):

‘‘(6) LIFETIME MAXIMUM AGGREGATE AMOUNT .FOR ALL STUDENTS.—Subject to paragraph (8) and notwithstanding any provision of this part or part B, beginning on July 1, 2026, the maximum aggregate amount of loans made, insured, or guaranteed under this title that a student may borrow (other than a Federal Direct PLUS loan, or loan under section 428B, made to the student as a parent borrower on behalf of a dependent student) shall be $257,500, without regard to any amounts repaid, forgiven, canceled, or otherwise discharged on any such loan.”

The Department initially read that exclusion as covering all PLUS loans made to students, including Grad PLUS. The revised reading narrows the exclusion to Parent PLUS loans only, bringing Grad PLUS inside the lifetime cap.

NAICU opposes this change of interpretation for several reasons:

• Timing and Implementation Concerns
  Institutions will have to make rapid changes and potentially adjust their financial aid packaging to accommodate this substantial change just weeks before the rules go into effect. The Department has not issued guidance, so most institutions and students are still unaware of this change.

• Lack of Transparency
  This unilateral decision was made to language that the rulemaking committee reached consensus on and had already been published in the proposed rule. Additionally, the reinterpretation came after the public comment period closed, thus preventing anyone from commenting on it directly.

• Problems with the Interpretation
  The Department’s interpretation not only makes the entire bolded portion above redundant, it also makes it irrelevant to the section of statutory text that it is in. Students cannot borrow Parent PLUS loans, so if the text is reinterpreted to only mean Parent PLUS loans, it has absolutely no relevance or bearing on the student borrowing maximum provision where it exists. Standard canons of statutory interpretation do not tend to allow federal agencies to interpret Congress’ words as irrelevant or misplaced.

NAICU continues to advocate for this change to be reversed to its original interpretation. In the meantime, institutions should review their students’ federal borrowing histories to determine whether this change will lead to unexpected borrowing constraints as of July 1, 2026.

For more information, please contact:
Justin Monk